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Category Archives: Thoughts

This is where we share all our thoughts relating to the foreign exchange markets.

Thoughts on Gold…………………the Million Dollar Question?!

I have been asked to share my thoughts about gold.

I am in the midst of putting together my thoughts on this subject, however, my initial thought is that gold has carved itself out to be an asset class to be included in one’s investment portfolio, whether from a diversification point of view , reduce correlation risks, hedge against other asset classes and currency.  This trend has developed through time beginning from 2007.

You will recall that equity markets were booming into 2007 before blowing up in 2008.  In 2007, quite a number of fund managers were beginning to diversify into gold to hedge downside risks in the equity markets and also the bond markets.

When the 2008 financial crisis came, it was a real blow to the banking and financial markets………..DISTRUST stemmed from the aftermath.  Retail and corporate investors, family offices, trusts and institutional funds decided to reallocate their monies into gold while waiting for the financial markets and regulators to sort themselves out.

The financial crisis showed up the structural and policy weakness of the financial and banking sector.  It revealed the lack of governance and compliance.

Then the economic downturn took route from 2010 to 2012, and more monies went into gold as a safe haven.

Anyway, we will be putting up a more comprehensive post shortly.

Look out for it.

Update on EURUSD and Trade 2 month call option

The Euro has trended downwards rather nicely.  The current spot of 1.2990 brings to our attention and interesting opportunity.

The lows was established on 13 November 2012 at 1.2698 and again in 2013 on 27 March 2013 t 1.2749.  The high being 1.3709 established on 1 February 2013.

The current spot has not yet retraced the 50% 1.3173 from the November’s lows and barely retracing the 38.2% level of 1.3059, the chart below shows the sensitivity: –

EURUSD with fibronacci taking low of 1.2698 of 13 Nov 2012

And, it’s further away from the 38.2% of 1.3110 and 50% retracement of 1.3212 from the lows of 27 March: –

 

EURUSD with fibronacci taking low of 1.2749_1 feb 2013

The 1 month call option strike at 1.2990 is 132bps or BE of 1.3123 and the 2 month call option is 184bps and BE of 1.3175.  It appears that the 2 month option is more economical and also buys us more time to allow the Euro to recover and build up some steam.

We have executed the 2 month call option: – EURUSD, strike 1.2990, BE 1.3175, expiring 21 June 2013.

 

 

 

 

 

 

 

 

Light on Data today

Not much on data today except for the UK which happened 20 mins ago; the claimant numbers edged lower at negative 7, forecast was o, unemployment fractionally higher at 7.9% versus forecast of 7.8%, vote by MPC were similar for both no rate change and QE.

I am going to cook my famous cioppino for dinner tonight.  Bought some fresh clams, crab meat and mussels.

Am not going to trade for the rest of the evening and night.

Here’s wishing everyone a great evening.

Movements

Asia was US Dollar gaining ground on most currencies: –

EURUSD: Open 1.31004, High 1.3106, Low 1.3063

AUDUSD: Open 1.0515, High 1.0527, Low 1.0415

GBPUSD: Open 1.5373, High 1.5380, Low 1.5307

USDJPY: Open 98.54, HIgh 98.54, Low 97.54

If one had traded the crosses, that is, AUDJPY, EURJPY, you would have doubled the impact of the move in the underlying currencies.

Data today

5pm Singapore time; Eurozone trade balance

8:30pm Singapore time; Empire State Manufacturing

10pm Singapore time; NAHB Housing Index

Update on the FX markets post non-farm payroll numbers

The non farm payroll numbers was clearly a surprise at 88K, when the market was expecting about 198K.  This was enough to initiate a selloff in the US Dollar, the Euro and Sterling rallied more than 100bps respectively.  The Yen moved more than one big figure still on the tails of Kuroda-economics.

I missed the non-farm payroll opportunity as I was out with my wife for dinner, Spanish tapas and a great bottle of spanish wine from the rioja region.

I will make an overall assessment this weekend with some thoughts going into next week.

Action of Confidence by IMF to the Eurozone

It is great news that the IMF has advanced $1Billion on top of the earlier $10Bn by the ECB to Cyprus.

This is a vote of confidence that the IMF, ECB and EU are working together to try and solve the multiple problems in the Eurozone.

However, the real issue is not to keep on printing monies, buying up junk securities and bonds to provide the necessary funds and liquidity.

At the end of the day, the EU, ECB and IMF should try and help these troubled countries in the Eurozone to restructure the monetary policies and fiscal policies so that eventually, job will be created, income will be created, consumption will happen, growth will happen, GDP  will come back.

Unless and until this happens, the Eurozone crisis will continue unabated.

12 March 2012 @ GBPUSD 1 month call option

We executed a one month call option on the GBPUSD at the strike of 1.5000, breakeven at 1.5110, cost of premium was 110bps and spot rate was 1.4922.

28 March 2013 @ EURUSD

We were correct on our technical analysis about the breakout.  It happened both from the technical viewpoint and also from the poor political sentiment in the Eurozone and Cyprus.

At the time of the earlier post, the spot rate was at 1.2840 and after the breakout, it reached a low of 1.2749 at 10pm Singapore time.  Since then, it has recovered and is presently sitting around the 1.2788 level.

The Hourly chart shows another potential breakout with the current spot trend on the upper band of the bollinger bands.  The critical German unemployment rate at 4:55pm Singapore time will the catalyst for the breakout.

Employment still bad in Germany and we suspect that the unemployment rate will come in worse than the forecasted -2.

27 March @ EURUSD @ Technical Analysis

Daily chart shows that the lowest point occured on 24 July 2012 at 1.2041 and the recent peak was on 1 February 2013 at 1.3709.

It appears that the Euro is basing or trying to find a base with a possible downside risk.  However, downside risk is mitigated by a rising ichimoku cloud, though the spot rate is currently trading below the cloud.

Trend is also near the bottom band of the bollinger bands.

Hourly chart shows that there is an impending breakout based on the squeezing of the bollinger bands.  Question is when it breaks out, is it going to break upwards or break downwards.  This will depend on the upcoming economic data and the political scene in the Eurozone.  The Cyprus fiasco is by no means the end of the story, the resolution was a stop gap measure to avoid a disaster.